Advanced Search
MyIDEAS: Login to save this paper or follow this series

Price Discrimination and Social Welfare with Demand Uncertainty

Contents:

Author Info

  • Mahmudul Anam

    ()
    (York University, Canada)

  • Shin-Hwan Chiangy

    ()
    (York University, Canada)

Registered author(s):

    Abstract

    Price, output and welfare erects of third-degree price discrimination is analyzed in the context of a risk-averse monopolist, who commits to xed prices before the revelation of random and potentially correlated demands. Assuming the disturbance term to be additive, white noise and the monopolist to have a quadratic (mean-variance) utility function, we show that price discrimination may occur with identical expected demands, the relatively risky but price insensitive market may be charged the lower price and despite linear demands, aggregate expected output may fall while social welfare rises. All of these results, which run counter to those in the deterministic model, are shown to be driven by the asymmetry in the revenue and risk characteristics of the markets and the willingness of the monopolist to trade increased level for reduced risk of expected prot in a manner similar to portfolio choice with risky and correlated assets. Key Words: Monopoly (D42), Monopolization Strategies (L12), Decision Making under Risk and Uncertainty (D81)

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://dept.econ.yorku.ca/research/workingPapers/working_papers/pd.pdf
    File Function: First version, 1999
    Download Restriction: no

    Bibliographic Info

    Paper provided by York University, Department of Economics in its series Working Papers with number 1999_04.

    as in new window
    Length: 17 pages
    Date of creation: Sep 1999
    Date of revision:
    Handle: RePEc:yca:wpaper:1999_04

    Contact details of provider:
    Postal: 4700 Keele Street, Toronto, Ontario, M3J 1P3
    Phone: (416) 736-5083
    Fax: (416) 736-5987
    Web page: http://dept.econ.yorku.ca/
    More information through EDIRC

    Related research

    Keywords:

    Find related papers by JEL classification:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Varian, Hal R., 1989. "Price discrimination," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 10, pages 597-654 Elsevier.
    2. Schmalensee, Richard., 1980. "Output and welfare implications of monopolistic third-degree price discrimination," Working papers 1095-80., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    3. Holahan, William L, 1975. "The Welfare Effects of Spatial Price Discrimination," American Economic Review, American Economic Association, vol. 65(3), pages 498-503, June.
    4. Varian, Hal R, 1985. "Price Discrimination and Social Welfare," American Economic Review, American Economic Association, vol. 75(4), pages 870-75, September.
    5. Layson, Stephen K, 1998. "Third-Degree Price Discrimination with Interdependent Demands," Journal of Industrial Economics, Wiley Blackwell, vol. 46(4), pages 511-24, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:yca:wpaper:1999_04. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Support).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.